Premium VOD: Will exhibs play favorites?

No-shows could win first PVOD round

While studios and exhibitors publicly duke it out over premium video-on-demand titles already coming to DirecTV, two Hollywood majors — Paramount and Disney — sit quietly on the sidelines. Will staying out of the fight give them an edge at the crowded cineplex?

It might, sources close to major exhibitors tell Variety, in subtle ways.

Unlike the hard-and-fast contracts that divvy up ticket revenue, most negotiations between distribs and exhibs are done on the fly. With the constant haggling over how a film plays out, a better relationship can impact whether it’s given the proper time and treatment to find an audience.

According to NATO president John Fithian, those relationships have been in freefall since the March surprise at CinemaCon, when exhibitors learned of the shortened PVOD window in Variety.

“Essentially everyone was emailing and texting me to try to find out what the hell was happening,” Fithian said, recalling the day the news broke. “The real problem was that the studios going forward with this plan never said anything about it and then haven’t communicated at all since … so this marks a real breakdown of trust between exhibitors and distributors.”

And exhibs have a hand in more than just the total length of a film’s run: Other considerations include showing trailers, size of screens, number of plays per day and lobby display space.

An example of how those elements came together is “Black Swan,” which opened modestly and was given a chance to hit its stride ($107 million domestic) only through careful negotiations between distrib Fox Searchlight and exhibs, according to an exhibition source. Though theater owners will continue to press any advantage for their own bottom lines, distributors who haven’t been candid about PVOD plans could find themselves at a competitive disadvantage if a film comes up against a Paramount or Disney title.

Neither Disney nor Paramount would comment on what — if anything — they may stand to gain by staying out of the PVOD model. And their reasons aren’t altruistic: Disney has its own on-demand distribution channels either on the market or on the way, and Paramount has focused on other alternate platforms, like mobile and Netflix.

“Sometimes it’s not just what you’re saying but the way you choose to say it,” says Greg Marcus, president of Marcus Theatres, a nearly 700-screen regional chain in the midwest. “We just want to have a conversation, because if a studio decides to put a movie out on PVOD 30 days after they’ve given it to me, then the value of that movie is completely different.”

Marcus added that if studios don’t tell him when they plan to put a movie on PVOD, then he has to protect his business. That could include renegotiating film deals, or whether to play movie trailers for free vs. showing paid advertisements.

The choices are equally tough on the distrib side, where tanking DVD sales have sent studios scrambling for new revenue streams.

“I’m sure that whatever we’re looking at today in terms of exhibition and distribution will be completely different over the next five years,” says a source close to distribution. “But the reality is that it’s all changing so we have to start moving forward because you have to be in a position where you’re making choices based on research and careful planning instead of fear.”

The four studios experimenting with PVOD have yet to make blockbuster titles available in the early window, but that could change quickly — the avalanche of summer movies means competition for screens is about to get more fierce.

“It has only become controversial now to talk about PVOD because we’re talking about doing it with movies lots of people care about and want to see,” a distribution source says. “When it’s a tiny movie, no one is worried about it changing the entire business.”

The fight over theatrical windows has implications on the production level, too. Helmers including Christopher Nolan, James Cameron and Todd Phillips have openly protested the shrinking theatrical window, lamenting not just damage to the format for which their movies were made, but the potential impact on moviemaking in general.

“I understand the economy has changed, but I’m scared that — as someone who wants to continue making smaller films — there will be a moment when exhibitors will only be able to book guaranteed blockbusters because PVOD will kill their ability to make any money after four weeks,” said “Jennifer’s Body” helmer Karyn Kusama, who signed a letter printed in Variety that decried the window.

Others believe that the erosion of theatrical play has already caused tremendous damage far beyond just exhibition.

“I don’t even think ‘Fight Club’ would get made right now,” says Bill Mechanic, who formerly ran 20th Century Fox and Disney Home Entertainment. “There’s so much fear and pressure that no one is asking whether a project is good, and making a good movie is really the way to get people to go to the movies over and over again.”

Mechanic, like Kusama, signed the open letter to the studios — but isn’t hopeful it will start an open discussion.

“Studios are only afraid if they think it means they might not get Peter Jackson’s next movie or James Cameron’s next movie,” says Mechanic. “Other than that I really don’t think they care.”